Understanding Human Rights Due Diligence (HRDD) Regulations
Human Rights Due Diligence (HRDD) is a crucial process that businesses undertake to identify, prevent, mitigate, and account for how they address human rights risks and impacts. HRDD has become a key component of responsible business conduct, rooted in international frameworks and increasingly codified into national and regional legislation.
The Origins of HRDD: The UN Guiding Principles on Business and Human Rights
HRDD was first conceptualised in the United Nations Guiding Principles on Business and Human Rights (UNGPs), endorsed by the UN Human Rights Council in 2011. The UNGPs provide a global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity. They are based on three foundational pillars:
The State Duty to Protect Human Rights – Governments must protect against human rights abuses by third parties, including businesses.
The Corporate Responsibility to Respect Human Rights – Businesses must avoid infringing on human rights and address negative impacts with which they are involved.
Access to Remedy – Victims of business-related human rights abuses must have access to effective remedies.
Under the second pillar, companies are expected to conduct a HRDD process to assess and mitigate risks to human rights within their own operations and their supply chains.
Domestic Due Diligence Regulations
Following the adoption of the UNGPs, several countries and jurisdictions began incorporating HRDD requirements into their legal frameworks, signaling a shift from voluntary guidelines to binding regulations. Some key examples include:
● France’s Duty of Vigilance Law (2017): Requires large companies to establish and implement due diligence plans to prevent human rights and environmental violations.
● Germany’s Supply Chain Due Diligence Act (LkSG) (2021): Mandates companies to take responsibility for human rights and environmental standards within their supply chains.
● UK Modern Slavery Act (2015): Requires companies to publish annual statements on their efforts to prevent modern slavery and human trafficking in their supply chains.
These laws reflect a growing trend of increased accountability for businesses with regards to human rights impacts, extending beyond direct operations and into global supply chains.
The EU Corporate Sustainability Due Diligence Directive (CSDDD)
The European Union has taken a significant step in harmonising HRDD obligations across its member states through the Corporate Sustainability Due Diligence Directive (CSDDD). The directive, which was approved by the European Parliament in May 2024, aims to impose mandatory HRDD requirements on large companies operating in the EU.
Key provisions of the CSDDD include:
● Mandatory HRDD: Companies must integrate human rights and environmental due diligence into their policies and risk management systems.
● Scope of Application: Targets large EU-based companies and non-EU companies with substantial turnover in the EU market:
Large EU limited liability companies & partnerships: More than 1000 employees and over €450 million turnover (net) worldwide.
Large non–EU companies: Over €450 million turnover (net) in EU.
SMEs : Micro companies and SMEs are not covered by the proposed rules.
● Liability and Enforcement: Companies that fail to comply may face civil liability and administrative penalties, ensuring enforcement mechanisms with tangible consequences.
Member States have until July 2026 to transpose the Directive into national law. Twelve months later, the regulations will begin to apply to the first group of in-scope companies, and a staggered approach will follow, until full application in July 2029.
The CSDDD represents a landmark shift in corporate responsibility, recognising the crucial role played by businesses in ensuring respect for human rights. Though smaller companies are not currently covered, the directive’s scope may expand to include them over time, particularly those operating in high-risk sectors. In addition, SMEs may be affected through their business relationships with larger companies, who require compliance from their suppliers. As regulatory frameworks continue to develop, all companies must proactively adapt to ensure compliance and uphold human rights in their business activities.
What is involved in an effective HRDD process?
Implementing a HRDD strategy may initially seem overwhelming, but many aspects of the process may already be familiar from existing social compliance, CSR or responsible sourcing programs. Companies should identify and implement a smart mix of measures as part of an effective HRDD process, such as the following range of activities:
● Risk Assessments: Identifying potential human rights risks in operations and supply chains.
● Stakeholder Engagement: Consulting with affected communities, workers, and NGOs to understand human rights impacts.
● Audits and Monitoring: Conducting on-site assessments of suppliers and business partners to ensure compliance with human rights standards.
● Corrective Action Plans: Implementing measures to address identified risks and prevent future violations.
● Training and Capacity Building: Educating employees and suppliers on human rights policies and best practices.
● Grievance Mechanisms: Establishing channels for workers and communities to report human rights concerns.
● Transparency and Reporting: Publicly disclosing due diligence efforts and human rights performance.
HRDD has evolved from a voluntary practice under the UNGPs to a legally mandated requirement in many jurisdictions; It is clear that worldwide, businesses face increasing pressure to embed HRDD into their operations and supply chains. The future points towards greater accountability, enhanced corporate responsibility, and stronger protections for affected stakeholders worldwide. As businesses navigate this landscape, integrating robust due diligence mechanisms will be crucial in meeting not only regulatory expectations, but the expectations of their investors and consumers.
Human Rights Due Diligence (HRDD) is a crucial process that businesses undertake to identify, prevent, mitigate, and account for how they address human rights risks and impacts. HRDD has become a key component of responsible business conduct, rooted in international frameworks and increasingly codified into national and regional legislation.
The Origins of HRDD: The UN Guiding Principles on Business and Human Rights
HRDD was first conceptualised in the United Nations Guiding Principles on Business and Human Rights (UNGPs), endorsed by the UN Human Rights Council in 2011. The UNGPs provide a global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity. They are based on three foundational pillars:
The State Duty to Protect Human Rights – Governments must protect against human rights abuses by third parties, including businesses.
The Corporate Responsibility to Respect Human Rights – Businesses must avoid infringing on human rights and address negative impacts with which they are involved.
Access to Remedy – Victims of business-related human rights abuses must have access to effective remedies.
Under the second pillar, companies are expected to conduct a HRDD process to assess and mitigate risks to human rights within their own operations and their supply chains.
Domestic Due Diligence Regulations
Following the adoption of the UNGPs, several countries and jurisdictions began incorporating HRDD requirements into their legal frameworks, signaling a shift from voluntary guidelines to binding regulations. Some key examples include:
● France’s Duty of Vigilance Law (2017): Requires large companies to establish and implement due diligence plans to prevent human rights and environmental violations.
● Germany’s Supply Chain Due Diligence Act (LkSG) (2021): Mandates companies to take responsibility for human rights and environmental standards within their supply chains.
● UK Modern Slavery Act (2015): Requires companies to publish annual statements on their efforts to prevent modern slavery and human trafficking in their supply chains.
These laws reflect a growing trend of increased accountability for businesses with regards to human rights impacts, extending beyond direct operations and into global supply chains.
The EU Corporate Sustainability Due Diligence Directive (CSDDD)
The European Union has taken a significant step in harmonising HRDD obligations across its member states through the Corporate Sustainability Due Diligence Directive (CSDDD). The directive, which was approved by the European Parliament in May 2024, aims to impose mandatory HRDD requirements on large companies operating in the EU.
Key provisions of the CSDDD include:
● Mandatory HRDD: Companies must integrate human rights and environmental due diligence into their policies and risk management systems.
● Scope of Application: Targets large EU-based companies and non-EU companies with substantial turnover in the EU market:
Large EU limited liability companies & partnerships: More than 1000 employees and over €450 million turnover (net) worldwide.
Large non–EU companies: Over €450 million turnover (net) in EU.
SMEs: Micro companies and SMEs are not covered by the proposed rules.
● Liability and Enforcement: Companies that fail to comply may face civil liability and administrative penalties, ensuring enforcement mechanisms with tangible consequences.
Member States have until July 2026 to transpose the Directive into national law. Twelve months later, the regulations will begin to apply to the first group of in-scope companies, and a staggered approach will follow, until full application in July 2029.
The CSDDD represents a landmark shift in corporate responsibility, recognising the crucial role played by businesses in ensuring respect for human rights. Though smaller companies are not currently covered, the directive’s scope may expand to include them over time, particularly those operating in high-risk sectors. In addition, SMEs may be affected through their business relationships with larger companies, who require compliance from their suppliers. As regulatory frameworks continue to develop, all companies must proactively adapt to ensure compliance and uphold human rights in their business activities.
What is involved in an effective HRDD process?
Implementing a HRDD strategy may initially seem overwhelming, but many aspects of the process may already be familiar from existing social compliance, CSR or responsible sourcing programs. Companies should identify and implement a smart mix of measures as part of an effective HRDD process, such as the following range of activities:
● Risk Assessments: Identifying potential human rights risks in operations and supply chains.
● Stakeholder Engagement: Consulting with affected communities, workers, and NGOs to understand human rights impacts.
● Audits and Monitoring: Conducting on-site assessments of suppliers and business partners to ensure compliance with human rights standards.
● Corrective Action Plans: Implementing measures to address identified risks and prevent future violations.
● Training and Capacity Building: Educating employees and suppliers on human rights policies and best practices.
● Grievance Mechanisms: Establishing channels for workers and communities to report human rights concerns.
● Transparency and Reporting: Publicly disclosing due diligence efforts and human rights performance.
HRDD has evolved from a voluntary practice under the UNGPs to a legally mandated requirement in many jurisdictions; It is clear that worldwide, businesses face increasing pressure to embed HRDD into their operations and supply chains. The future points towards greater accountability, enhanced corporate responsibility, and stronger protections for affected stakeholders worldwide. As businesses navigate this landscape, integrating robust due diligence mechanisms will be crucial in meeting not only regulatory expectations, but the expectations of their investors and consumers.
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